Jessica Karmasek Jan. 27, 2016, 2:37pm


HARRISBURG, Pa. (Legal Newsline) - Earlier this month, a Pennsylvania court ruled that the state Attorney General’s Office is permitted to use private counsel to pursue consumer protection lawsuits against nursing homes or long-term care facilities.

In its Jan. 11 ruling, a majority of the Commonwealth Court sided with Attorney General Kathleen Kane’s office. A seven-judge panel heard arguments in November.

“Contrary to the Facilities’ assertion, DOH (state Department of Health) does not have exclusive authority to investigate or pursue litigation concerning staffing levels at skilled nursing facilities or to employ a model to establish such standards within the context of an anticipated action under the Consumer Protection Law,” President Judge Dan Pellegrini wrote in the 22-page majority opinion.

“As outlined above, the Health Care Facilities Act does vest DOH with the authority to establish and enforce regulations setting minimum standards in the operation of health care facilities, to assure safe, adequate and efficient facilities and services, and to promote the health, safety and adequate care of the patients or residents of such facilities. DOH also has the authority to initiate an enforcement action to restrain violations of the Health Care Facilities Act or the DOH’s regulations.”

The judge continued, “However, DOH has no authority to investigate the consumer marketing and billing practices of skilled nursing and long-term care facilities or to initiate litigation to correct illegal acts in this regard. Rather, Section 204(d) of the Administrative Code authorizes OAG to administer its provisions regarding consumer protection, and Sections 4, 4.1 and 5 of the (Unfair Trade Practices and) Consumer Protection Law specifically authorize OAG to restrain and obtain restitution for acts deemed illegal under its provisions.”

In 2012, the Attorney General’s Office entered into a contingency fee agreement with plaintiffs law firm Cohen Milstein Sellers & Toll PLLC -- which since has been amended -- through which the firm began an investigation into whether a number of the long-term care facilities had fraudulently, deceptively or falsely represented their services in their billing and marketing practices under the Unfair Trade Practices and Consumer Protection Law, breach of contract and unjust enrichment.

In April, a group of nursing home operators filed their lawsuit in the Commonwealth Court, trying to kill the firm’s apparent deal with Kane’s office.

The dozens of owners and operators of long-term care facilities in the state argued that the attorney general overstepped her bounds in investigating skilled nursing facilities’ staffing levels and hiring Cohen Milstein -- which donated thousands to Kane’s campaign -- to help conduct the investigation.

The operators argued that Kane’s delegation of authority to the law firm is improper because it gives the firm a financial stake in pursuing litigation against them.

In particular, the long-term care facilities argued that the Healthcare Facilities Act gives jurisdiction in the matter only to the state Department of Health, and the Attorney General’s Office is not empowered to delegate its authority under state law and the Pennsylvania Constitution.

The Commonwealth Court rejected the facilities’ arguments.

The health care services that the facilities provide to their residents fall within the “ambit” of the Consumer Protection Law, Pellegrini wrote for the majority.

While minimum staffing levels may be regulated by the DOH for health and safety purposes, the judge said the Attorney General’s Office may enforce any representations, advertisements or agreements that nursing facilities made with respect to staffing through the Administrative Code and Consumer Protection Law.

“Such action is proper under the foregoing statutes and does not constitute any impermissible administrative rulemaking regardless of whatever evidence OAG uses to establish a violation, including any type of staffing model,” Pellegrini wrote. “What OAG is seeking to enforce is the level of staffing that the Facilities either represented, advertised or promised to provide to their residents and not what level OAG deems to be appropriate for the care of such residents.”

The court also ruled, citing a 2010 ruling in Commonwealth v. Janssen Pharmaceutica Inc., that the facilities lack standing under Section 103 of the Commonwealth Attorneys Act to “assert any claim” with respect to the fee agreement between the attorney general and Cohen Milstein, or the participation of Cohen Milstein in the attorney general’s investigations or enforcement actions under the Administrative Code or the Consumer Protection Law.

The court, in turn, granted Kane’s motion to dismiss the lawsuit and dismissed the facilities’ amended petition for review seeking declaratory relief.

Judge Cohn Jubelirer did not participate in the court’s decision. Judge Patricia McCullough filed a dissent.

The facilities -- certified providers under federal Medicare and Medicaid programs, with at least 10,995 licensed beds in the state -- have said the Cohen Milstein-driven investigation is “an effort to create a ‘problem’ where none exists in a search for profits for itself.”

They pointed to a New York Times article, published in December 2014, showing that more attorneys general -- Kane, included -- are hiring private law firms to file lawsuits on behalf of their states.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

Organizations in this Story

Pennsylvania Office of the Attorney General
16th Floor Strawberry Square
Harrisburg, PA 17120

Cohen Millstein
190 South La Salle Street
Chicago, IL 60603

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